Google Instant May Provide Instant Revenue Increase

When Google rolled out a new feature called Google Instant for its search engine in September, thousands of its AdWords advertisers—who pay the company every time a user clicks on their text ads next to search results—took note. Now Marin Software, one of the largest managers of advertiser spending on search engines, has weighed in on the effects of the new feature.

Matt Lawson, a vice president of marketing at Marin Software, which manages about $1.3 billion in spending by advertisers such as retailer Macys and travel search firm Kayak, said spending by clients grew by about 2% in the two weeks after Google Instant launched.

Google Instant shows immediate search results when users type letters in the search box, rather than waiting for them to finish their query and hit “enter.” Just as they had before Google Instant, advertisers bid in an auction for the right to display ads next to results for certain search queries. Advertisers pay only when a user clicks on their ad.

Google executives initially said the change shouldn’t materially impact advertisers, and earlier this month said overall revenue impact on Google had been “minimal.”

But Marin Software’s Lawson said the number of times his advertisers’ ads appeared in Google results grew by 9% in the two weeks after the launch of Instant, and the number of times people clicked on those ads rose by 5%. Despite those increases, revenue spent by advertisers jumped by 2%.

In other words, the cost advertisers paid per click actually dropped by more than 3%. “Advertisers are getting better value for their money,” Lawson said.

Lawson said it is possible that advertisers didn’t adjust their AdWords budgets to make up for the increase in volume of searches. So as those advertisers depleted their budgets faster than normal, they dropped out of subsequent auctions, leading to lower costs per click.

Some advertisers were “concerned that Google was doing a little bit of evil,” Lawson added. “But as is often the case, doing what’s best for users benefits everyone in the ecosystem.”

Still, a 2% revenue increase would be meaningful for Google, which is on pace to generate about $30 billion in revenue this year.

Not everyone agrees with Marin Software’s conclusion. Peter Levin, a manager at LSF Interactive, which handles $9.5 million in AdWords spending for brands such as Calvin Klein and SpeedoUSA, says its data on the costs for advertisers show few changes.

Levin said his analysis “yields surprisingly consistent data week over week, suggesting that Google Instant has not changed the way that users search.”

A Google spokesman said: “We don’t comment on individual firms or campaigns’ performance metrics.” This month Jonathan Rosenberg, a senior vice president of product development at Google, told analysts that Google Instant is helping to shave seconds off of users’ searches and wasn’t developed based on a “narrow financial calculation.”